You guys need to read her bio to answer these questions. Also there was an excellent article about her in the New York Times a good while back that covered many of the questions you have asked.
Originally Posted by Alex Hawley
Diane had high regard and empathy for her subjects and never regarded her photographs to be lurid or explotive. She took the time to point her camera at individuals that are often disregarded or over looked by society and photographers which showed a unique insight into their lives as well as our own.
What a photographer photographs tells us as much about the subject as it does about the photographer. What we see in photographs and how we react to them tell us much about ourselves. Arbus wasn't attempting to chronicle a collection of freaks or misfits. The fact that many of her photographs give us pause and make us a bit uncomfortable is a tribute to her personal vision and her sympathy with her subjects.
Susan Sontag wrote about Arbus' work in her book 'On Photography.' If you have not read it yet, it is worth reading not only to read about Diane's work but other photographers such as August Sander and Walker Evans. Two photographers that can also be accused of explotation of their subjects, though in reality that wasn't their aim at all.
What I find also interesting is the fact that she only used a TLR (a Rollei perhaps.) With it she had the freedom to manage her images and engage herself and the viewer with her subjects. Not having to manage equipment was a big plus in this regard. A result of this approach is that the prescence of the photographer is felt but not in an overt obvious way.